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The Ministry of New and Renewable Energy (<a href="https://mnre.gov.in/" target="_blank" rel="noopener">MNRE</a>) has scrapped the need for a separate performance bank guarantee for solar projects to be set up under the Component A of the Pradhan Mantri Kisan Urja Suraksha Evem Utthan Mahabhiyan (KUSUM) program.
MNRE has also done away with submitting a performance bank guarantee under the guidelines for solarization of agricultural feeders under component-C of the KUSUM program.
Component-A
Earlier, developers had to submit an earnest money deposit (EMD) of ₹100,000 (~$1,289) in the form of a bank guarantee with the expression of interest. A successful bidder had to pay ₹500,000 (~$6,445) as a performance bank guarantee within 30 days of issuing the award letter. After submitting the performance bank guarantee, the initial EMD was returned to the successful developer.
Per the amended guidelines, developers must submit an EMD of ₹100,000 (~$1,289) in the form of a bank guarantee with the expression of interest. Once a developer wins the bids, the EMD will be converted into a performance bank guarantee.
Earlier, the successful bidder was required to sign a power purchase agreement (PPA) with the distribution company (DISCOM) as per the timeline. If the bidder failed to execute the PPA on time, DISCOM could encash the bank guarantee equivalent to EMD as a penalty.
Under the amended guidelines, the successful bidder must sign a PPA with the DISCOM as per the timeline. If the bidder fails to execute the PPA on time, DISCOM is allowed to encash the entire bank guarantee as a penalty.
Component-C
Per the amended guidelines, renewable energy as a service company (RESCO) developers no longer have to submit a bank guarantee to secure central financial assistance (CFA). The CFA will now be released after two months of the operation of the solar project.
Earlier, RESCO developers had to furnish a bank guarantee to avail CFA. The bank guarantee was then released in four lots of 25% each after 2.5 years, 5 years, 7.5 years, and 10 years from the commercial operational date.
In December 2021, MNRE <a href="https://mercomindia.com/daily-news-wrap-up-mnre-guidelines-solar-program/" target="_blank" rel="noopener">issued</a> a new guideline stating that states can invite bids to empanel vendors for different regions to install standalone solar pumps under the KUSUM program. However, the price discovered in the latest centralized tender would be considered the ceiling price.
Mercom <a href="https://mercomindia.com/amendments-for-kusum-program-to-scale/" target="_blank" rel="noopener">reported</a> that the performance bank guarantee criterion was a barrier for many to participate in bids in large numbers. There were suggestions that the performance bank guarantee could be restricted to the number of pumps the bidders intend to install in a cluster.

Separate Bank Guarantee Not Needed for Solar Projects Under KUSUM Program: MNRE

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